Mandala Airlines Reaches New Heights

By webadmin on 09:41 pm Sep 30, 2009
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Yanto Soegiarto

Following a successful phase-one restructuring of its operations, Mandala Airlines is aiming to be one of the leading domestic airlines in Indonesia.

“Mandala employees now have a keen sense of belonging, are open to change and take pride in their new corporate culture,” said the airline’s new president director, Nurhadiono Nurjadin, 46.

Mandala is now focusing on the commercial side of its business after two years of joint-venture operations managed by a professional international team. “The shareholders decided that the next phase of restructuring will be commercial. A revamp of flight operations, including the fulfilling of safety requirements and a rejuvenation of the fleet, went well,” Diono, as Nurjadin is known, said.

Mandala has also successfully implemented the safety management system. It is in the final stage of obtaining safety certification from the International Aircraft Association, which is expected by year-end. Diono, who has held top posts at the wide-ranging Cardig International group of companies, said he was appointed Mandala president director by the shareholders because they wanted someone knowledgeable about the Indonesian market.

Although Diono still controls many companies under Cardig, he is now at Mandala full time.

The airline is 51 percent owned by Cardig, with the other 49 percent owned by US-based private equity fund Indigo Partners.

Diono has no shortage of connections to flying. He comes from an Air Force family and his father was a pilot. He grew up in an environment that shaped his passion for aircraft and interest in airlines.

“Since childhood, I have had a very keen interest in flying. When I returned to Indonesia from studying finance in the US, I was interested in airlines,” he said.

Diono attributes Mandala’s early flight operations success to his predecessor, Warwick Brady. He praised Brady for initiating the most difficult process in the transformation by establishing a change in management philosophy that turned the company around.

Brady and the international management was able to transform Mandala from an ailing airline with a poor reputation into one that is now gaining plaudits for quality and reliability.

This is particularly so since the European Commission’s recent partial lifting of the ban on Indonesian airlines flying to Europe. Mandala is the first private-sector airline to be eligible to fly to Europe, along with state-owned Garuda and two charter flight companies.

Tengku Burhanuddin, secretary general of the Indonesian National Air Carriers Association (INACA), said the Mandala restructuring was successful.

“It promoted Mandala’s brand image as a safe and reliable airline. Its operations are also more efficient due to the single-aircraft policy. Commercially, Mandala is capable of increasing the number of passengers and expanding its domestic network,” he said

He adds that the airline carried more than 37 million passengers in 2008 and is still growing by 10 percent to 15 percent.

Currently, it ranks fifth in terms of total passengers among carriers in Indonesia.

To boost its commercial performance, Diono said Mandala needs to continue strengthening its commercial team, identify opportunities in the domestic market, add more aircraft and invest more capital.

He explains that Mandala’s strategy is to promote safety, provide quality customer service and improve on-time performance, all of which are an integral part of the company’s corporate culture.

The company is concentrating on the corporate market segment by agreeing to open audits of safety standards by multinationals and oil companies such as Total, Conoco and Santos.

“We wish to focus on the corporate market by offering an alternative to Garuda. Those companies each have their own safety standards. That was why we offered them to audit our safety management system,” he said.

On the customer service side, Diono said Mandala is making it easier to book and pay for tickets while offering competitive prices. Payment is now possible via ATMs or through secure, online transactions such as Paypal.

“However, we are not a low-cost carrier. We couldn’t attract investment if we were. I concede we’re not as large as Garuda or Lion Air, but can maintain attractiveness by creating a ‘Mandala market’ ” he said. Diono declined to reveal Mandala’s financial details, but adds, “we have a commitment to add more aircraft. To date, Mandala has been able to stand on its own two feet financially in terms of operations.”

Kabul Riswanto, a veteran pilot and airline expert, said that as Mandala was not a listed company, it was difficult to say whether it was successful financially.

“As an indication, though, we can see that Mandala has passed international safety standards and is expanding its fleet. That would imply it is financially solid,” he said.

Diono sees consolidation as the name of the airline industry game. Smaller companies will either have to merge or carry out joint operations with other airlines.

Based on new regulations coming into effect in 2012, airlines will have to operate at least 10 aircraft, of which at least five should be owned by the airline itself.

“That need not always mean takeovers,” Diono said. “Currently, there are too many small airlines, even though the market is large.

“Indonesia still needs at least three or four good, strong airlines. That will need substantial, continued investment to promote safety standards and consolidation.”

This article is an edited version of one that appears in October’s edition of Globe Asia magazine.